Posted by: Josh Lehner | August 24, 2016

Oregon’s Tightening Labor Market

We know Oregon’s economy is booming today. Job growth is outpacing the typical state by a considerable margin. These gains are strong enough to make up the recessionary losses and keep pace with population growth. As labor becomes scarce in a tight market, wages rise. Businesses must compete more on price to attract and retain the best talent. One positive result of these dynamics is the growing labor force and increasing participation rate as more Oregonians look for work.

Even as all these good things are happening, a common question from businesses and in terms of the macro outlook is “where is the labor going to come from?” Our office’s view is that the stronger economy will continue to pull Oregonians into the workforce, in addition to the influx of young working age migrants. If you dig into the job opening surveys themselves, they show that a lot of the underlying difficulty in filling positions isn’t just about the number of applicants but also things like requiring experience and not training workers plus low wages, odd hours and the like. All that said, it does not mean there cannot be issues in specific industries or regions of the state, however.

Take the case of low-wage workers for example. As the Wall Street Journal reports, across the nation low-wage workers are seeing the strongest wage gains today (admittedly after a long spell of no gains). This is the result of businesses realizing they need to raise wages to get workers in a tighter market. The WSJ highlights the growing number of large corporations, like JP Morgan Chase and McDonalds, that have announced higher pay levels for their workers. However this is happening in Oregon as well. Two weeks ago the Governor’s Council of Economic Advisors took a trip to Newport to meet with community leaders and local businesses (more on the trip soon). One interesting topic was that of the new minimum wage law. Laura Anderson, owner of the fantastic Local Ocean Seafoods restaurant and fish market, noted how she and other businesses were initially worried about the new law and increased business costs. However, as the economy gets tight, wages do rise. Laura noted that today on the coast the effectively minimum wage is $11 per hour. Anecdotally this can be confirmed by the giant banner hanging outside the Newport Taco Bell advertising they are hiring, starting at $11 per hour.

All of this is to say that while Oregon is approaching full employment, we do not have great measures of full employment itself. It is more of a concept than a hard calculation. That doesn’t mean we don’t try. That is the entire purpose behind our Total Employment Gap work. Another, simpler and easier-to-understand way to gauge economic slack is to look at the number of unemployed per job opening. How large is the pool of available workers relative to what businesses need? Here, too, labor market slack is diminishing or potentially gone based on the historical patterns. This is true even if you add back in the “missing” workers who dropped out of the labor force.

UnempJobRatio0716

There are myriad reasons this matters for the economy but I will highlight two interrelated items. First, full employment matters for businesses because it does become harder to attract and retain workers when labor is scare. Second, a stronger economy and tighter labor market is great for workers as wages rise. One of the biggest issues with stagnant wages in the 2000s was the fact that the economy never fully tightened. Even with the housing bubble, the mid-2000s expansion was too short and too lackluster for the economy to reach full employment in many places, Oregon included.

This also matters for our office’s forecast. Oregon’s gains of 5,000 jobs per month over the past couple of years is not a sustainable rate. Those are peak growth rates. They eat up the economic slack. However as the economy approaches and reaches full employment, growth will slow to a sustainable rate. Right now our estimates show that Oregon needs about 2,000 jobs per month to keep pace with population growth. The exact timing of this transition, or slowing is an open question that we regularly discuss with our advisors. It must also be pointed out that the economy does not typically transition to sustainable rates of growth. It usually slams down into recession and the cycle starts anew. That said, there are not a lot of worrisome signs on the horizon right now and our advisors remain bullish.

Note: We are using our office’s blended help wanted ads figures which combines historical newspaper ads with today’s online help wanted. This is important to be able to look at historical patterns. Even as the online help wanted ads data starts in 2005, newspapers were still important than. So simply using just the online data from 2005 through today can be misleading.

Posted by: Josh Lehner | August 18, 2016

Oregon Income Update, 2016

As we work on the next economic and revenue forecast (release date September 14th), I just wanted to share a quick update on Oregon personal income. Just as the economy and labor market are doing well, personal income is growing fairly quickly too. Gains today are as strong as those seen during the housing boom. Right now Oregon’s income growth over the past year ranks 5th best among all states and DC.

Note 1: Actual data from BEA for Oregon goes through 2016q1. Given we have US income through 2016q2 plus Oregon employment, population, housing permits and the like, we can impute reasonable estimates for Oregon’s 2016q2 income. Note 2: The sharp drop in income growth in 2013 is due to the expiration of the payroll tax cut and of the Bush tax cuts on the highest income households which pulled forward their investment-related income into 2012.

OYP16q2

So what is driving Oregon’s stronger income growth? Pretty much everything. The biggest component here are wages, which have been consistently growing 6 or 7% annually in recent years. Withholdings out of paychecks have been even stronger, which matters for our revenue forecast. Right now Oregon’s total wages are increasing at the 6th fastest pace nationwide. Other income components are growing, albeit slower than wages. See the table below for the details.

IncTab16q1

All of the above looks at total income in the state or total wages or total dividends and the like. Given Oregon also sees faster population growth and faster employment growth during expansions, you should expect to see some better total numbers in Oregon relative to the typical state. Unfortunately that has not always been the case.

Looking back at the first graph reveals that since the Asian Financial Crisis in the late 1990s, Oregon’s personal income has grown right around the national average each year. If we have the same income growth but faster population growth, that means Oregon’s per capita personal income is eroring relative to the national average. (Math!)

Similarly, Oregon’s employment and total wages typically outpace the nation. However if wages are not growing disproportionately faster than the typical state, Oregon’s average wage relative to the nation does not improve. This has also been the case for much of our recent history.

However these patterns have flipped in recent years. Oregon’s per capita personal income is on the rebound following the big losses since the mid-1990s. Some of this is due to slower U.S. income growth (not ideal) but some is due to strong Oregon growth (which is ideal). However where the biggest improvements are seen are among average wages. We regularly write about this in our forecast reports and in our public presentations, but it’s worth highlighting again.

Oregon’s average wage, at least in the past 50 years, has always been below the national average wage. We took a huge step back during the 1980s when the timber industry restructured. Oregon lost 12% of its jobs in the early 80s recession, whereas we “only” lost 8.5% of our jobs in the Great Recession. During the technology-led expansion in the 1990s, we regained about half of the decline in average wages and that held steady for more than a decade. However, since the Great Recession Oregon’s wages have outpaced the nation’s by a considerable margin. Oregon’s average wage today is at it’s highest relative point in more than a generation. Or put differently, Oregon’s average wage today is at it’s highest relative point since the mills closed in the 1980s. Some of this is due to the fact the recovery in Oregon has been led by high-wage jobs, even to a larger extent that nationally has been the case. But this industry or occupational mix can only explain a portion of our relative wage gains. The bulk of Oregon’s improvement here is due to stronger wage gains within industries and occupations. This is great news. It must also be pointed out, however, that national wage growth has been lackluster at best. So Oregon’s decent wage gains — they have not been particularly robust, but they are decent — look great in comparison.

IncShare16q2

In terms of the outlook, our office expects continued improvement in the per capita personal income measure as our economic expansion is likely to continue to outpace the typical state. Yet our baseline outlook does not have Oregon’s per capita income converging with the U.S. The gap is large and would take a long time to close even during a strong expansion.

In terms of wages, our office does not expect too much further improvements. This is for a couple of reasons. First, we have already seen average wage growth in Oregon pick up in recent years. We have a little more acceleration built into the outlook as the economy reaches full employment but not much. So Oregon wage gains are expected to hold relatively steady. Second, the U.S. outlook we use from IHS Global Insight does have wage growth accelerating in the coming years. So when you combine our steady Oregon outlook with an accelerating U.S. outlook, Oregon’s average wage does not continue to improve relative to the national average wage. (Again, math!)

For more on Oregon’s income relative to the nation and why per capita personal income misses the mark as the benchmark comparison, please see our previous post.

Posted by: Josh Lehner | August 16, 2016

Oregon Unemployment, Deja Vu?

The unemployment rate in Oregon has increased from 4.5% to 5.2% in the past two months. What is going on here? Well, regular readers know it always important to take real-time economic data with a grain of salt, but the so-called household survey from which the unemployment rate is calculated has been particularly noisy in recent years. Let’s take a quick stroll down memory lane.

Exactly a year ago we wrote the following in our September 2015 forecast document, released in August 2015 (PDF page 11).

As our office warned three months ago, the large declines in the unemployment rate to start the year likely overstated the strength in the labor market. As the unemployment rate has increased over the summer, it has now returned to its post Great Recession trend, and likely understates the improvements in the labor market.

And last quarter we wrote the following. (Also PDF page 11.)

…The pattern of unemployment rate changes does not likely reflect the overall pattern of growth in the Oregon economy…While there is no question Oregon’s economy continues to improve, future revisions may reveal a somewhat different, and smoother path for the unemployment rate.

So once again we find ourselves with a plunging unemployment rate early in the year, only for the summer months to pull it back up, more or less to the post Great Recession trend. The month to month fluctuations can be noisy but the overall improvements are certainly real and noticeable.

ORUnemp0716

For the record there are zero conspiracy theories here. The underlying samples used in these surveys are small. The unemployment rate, labor force participation rate and the like are derived from responses by about 1,000 Oregon households each month. (Update: As Guy Tauer points out in the comments, besides the sample data these calculations also pull in other administrative data like UI claims, payroll employment and the like. Thanks Guy!) The 2010 Census pegged the total number of households in Oregon at more than 1.5 million and that was six years ago. Samples can be tricky and noisy. That is what is going on here by all accounts.

As for how this impacts our office’s forecast, in short it does not have much of an impact. Our office’s baseline outlook calls for Oregon’s longer-run, or steady-state unemployment rate to be about 5.4%. So our forecasts in the past year or two have actually had an increase in the unemployment rate built into them.

The reason is our original Return to Normal Labor Market Dynamics work. First come more job opportunities — employment growth continues to outpace population growth. Second wages rise as businesses must compete on price to attract and retain the best workers in a tighter labor market. And third, individuals return to the labor force in search of these more-plentiful and better-paying jobs. Right now Oregon’s labor market has returned to these normal types of dynamics seen during expansions, even if it took a few years following the fallout of the Great Recession.

One potential downside to the noisy data is the labor force participation rate itself. While it has turned the corner, the gains seen so far in 2016 have been particularly strong. This big improvement, like the noisy unemployment rate, has been in the unrevised or unbenchmarked data. It is certainly possible that future revisions will tamp down the participation rate gains seen in recent months. However this is likely a noisy data issue. Our office’s forecast, shown below for comparison purposes, calls for LFPR gains as the strong economy continues. A larger share of the population really is working and looking for work. Now the expansion cannot fully overcome the demographics over the medium and longer term but it can when we are adding jobs at a 3% or higher rate like we are today.

LFPRforecast0716

Where the noisy household survey data will impact our office’s work is in our Total Employment Gap estimates. The rising unemployment rate and flattening LFPR in the past couple of months does indicate the gap is slightly larger in the current data than we had thought just a couple months ago. While monthly data can be noisy, the Oregon economy is still doing well and we are on track to reach full employment in the near future. Furthermore our office does expect job growth to slow in the future after the economy reaches full employment or shortly thereafter. Right now we have the slowdown happening in 2017 but this is an open question that we regularly discuss with our advisors. Right now none of them are seeing any particular weakness in their individual industries or regions of the state.

Posted by: Josh Lehner | August 9, 2016

Oregon Regional Update, Summer 2016

Just a quick update on regional employment in Oregon over the past decade or so. Right now five of the state’s nine regional economies — per our office’s groupings — have regained all of their Great Recession job losses and are currently at all-time highs for employment. Two additional regions are nearly there and will be in the coming months. The two nonmetro or rural regions in the southern half of the state are recovering today but still have a long way to go to regain all of their lost jobs (more on that in a minute).

RegTrellis0616

While the actual number of jobs matters a lot, what we also care about is employment relative to the population. Are there enough jobs for everyone? That is why our office continues to use demographically-adjusted potential labor force figures to gauge the Jobs Gap. This looks at employment relative to the size of the population that would likely be working or looking for work if the economy was firing on all cylinders or at full capacity. The key technical point here is that it adjusts for the aging Baby Boomers as they are entering into retirement in greater numbers these days.

In terms of the Jobs Gap the state overall just last month finally has added enough jobs to catch back up with population growth since the onset of the Great Recession. Two other regions — the North Coast and the Portland Metro — have also closed their Jobs Gap. Two additional regions — Northeastern Oregon and the Columbia Gorge — are close. The remainder of the state has larger Jobs Gaps but they are closing as the economy improves. Central Oregon in particular is seeing robust gains — Bend is adding jobs at a 6-8% annual pace — but given the severity of the Great Recession and the fact that the population continued to increase, the Jobs Gap has yet to fully close.

RegJobsGap0616

Just a reminder of how the aging demographics can impact the potential labor force. In rural Oregon in particular we know the potential labor force has been shrinking and in some places will continue to for a few more years. However much of this adjustment has already occurred. Demographics are not expected to weigh on the rural economies nearly as much moving forward, if at all. However, as an example, the Jobs Gap can close both from more jobs and also a smaller potential labor force. So far in Southeastern Oregon the gap has fallen nearly in half since the worst of the Great Recession and its aftermath. This improvement has come, roughly, three-quarters due to employment growth and one-quarter due to the smaller potential labor force.

SEJobsGap0616

Overall the economy continues to improve. The majority of the state is seeing a record number of jobs and the growth is finally catching back up to accommodate all the new residents and workers over the past decade. This is certainly good and welcomed news. Even so, the recovery continues to be uneven with rural Oregon, particularly southern counties, still facing the largest Jobs Gap in the state. Growth has returned, these regional economies are on the mend, but further progress is still needed.

Posted by: Josh Lehner | August 2, 2016

Educational Attainment by Generation, Graph of the Week

It’s well documented that college graduates overall have better labor market outcomes than those without degrees. They participate in the labor force more, have a lower unemployment rate and earn higher wages. And in the context of job polarization, a college degree is the surest path to one of those high-wage jobs. In fact, if you dig into the Oregon Employment Department’s latest occupational projections, 79% of the growth in high-wage jobs requires a college degree for an entry-level candidate. If you want to be a competitive applicant for the high-wage jobs, a full 90% of the expected growth requires at least a Bachelor’s degree.

While our office is working on updating some trends and outcomes in higher education — it’s been more than three years since our report on education and student debt in Oregon — I wanted to share some more life cycle work I’ve been doing. This compares trends over one’s lifetime but also across generations or birth cohorts in the state. Previously we looked at how younger generations in Oregon spend more on housing than previous generations did at the same point in their life cycle.

How you read this graph is that each colored line represents an age or birth cohort. These are really 5 year groups, so the 1960 cohort is people born between 1958 and 1962, for example. As you move from left to right, the graph shows the share of the population with a Bachelor’s degree or more across the state. The higher the line the larger the share with a college degree.

LifeCycleEdAttain14

The good upshot is educational attainment in Oregon continues to increase. Millennials are, and continue to be on track, to be the best educated generation on record. This is due to the continued increase in the share of young adults enrolling in school. Some of this increase is due to societal trends but some is influenced by the business cycle as job opportunities dry up during recessions, thus reducing the opportunity cost of attending college. However attainment in Oregon also increases due to migration, which disproportionately consists of those with college degrees in recent decades. All told, attainment is increasing with each successive generation which bodes well for future economic growth.

The one exception is the 1960 cohort (gray line). Here the share of the population with a college degree is lower than the 1950 cohort (green line) at every point in the life cycle. I honestly am not sure what is going on here. The national figures show educational attainment flattening with a small dip, but not this large of an effect as seen in the Oregon data. This decline is visible in the published Census 2000 tables, so it’s not just a sample size issue of examining the microdata either.

My initial guess would it has something to do with the timing and the business cycle. The 1950 cohort came of age in the 1970s; a time when Oregon was booming and there was a massive wave of domestic inmigration to the state. The 1960 cohort came of age in the 1980s. Of course in Oregon the 1980s were a much darker economic period and the state actually lost population due to the severity of the early 1980s recession. I suspect this difference is driving these results, however I am not 100% certain here and it’s hard to tell based on the data. Even so, the fact that the college degree gap between the 1950 and 1960 cohort in Oregon has persisted ever since is rather fascinating.

Stay tuned for our higher education update in the coming weeks.

 

Posted by: Josh Lehner | July 28, 2016

U.S. Regional Job Growth Update, July 2016

Job growth nationwide so far in 2016 is a bit lower than in 2015 but essentially remains on par with recent years overall. However, our office, in addition to the Liscio Report, is hearing increasing chatter among some of our counterparts nationwide about disappointing revenue collections for both withholdings out of paychecks and also retail sales. These data series are very important; they are as real-time as it gets and not subject to revisions barring a banking/accounting error at the Department of Revenue. However they are incredibly noisy.

The question becomes is there a more pronounced economic slowdown taking place or are the disappointing revenues more a function of forecast errors? Below I provide a tl;dr summary for jobs and wages across the country. Sales taxes are a different animal that faces fundamental base erosion in addition to online competition and thus I will demur for the time being. See here for previous thoughts on sales vs income taxes and the impact of aging on revenues. Full slides at the end.

Summary of Key Findings

  • The Oil Patch slowdown is very real.
    • Job growth has slowed considerably in both the West North Central and West South Central regions.
    • Big oil metros are slowing too. Houston has decelerated from about 4% y/y to less than 1%. Oklahoma City has gone from 2% to 1%. Yet the impact is not everywhere. Dallas and Denver continue to see strong gains.
    • Rural counties in the Oil Patch are contracting. Job losses of 2% y/y to end 2015.
  • All other regions are seeing steady job gains, which are typically as strong as those seen during the housing boom, if not stronger
    • Exception is the Mountain division which is both outperforming the nation today and still below its mid-2000s pace.
    • South Atlantic and Pacific divisions are accelerating. Population growth has returned. Housing has turned from drag to driver. This acceleration is offsetting other weaknesses.
  • Nation’s biggest metropolitan areas still driving growth and outperforming rural areas in addition to small and medium sized cities.
    • The typical large metro is growing faster today than during the housing boom.
    • Large metros overall adding jobs nearly on par with the late 1990s growth.
    • Most big cities seeing steady gains in recent years. Some acceleration in places like St. Louis and Philadelphia are offsetting the slowdown in Houston and Oklahoma City overall.
    • Rural America outside of the oil patch counties continues to add jobs, albeit around 0.5% annually so far in recovery.
    • The growth rate differential today between the biggest metros and rural areas is the largest seen since the 1990 recession or the mid-1980s commodity bust.
  • Average wage growth is picking up.
    • However, only East North Central and Pacific wages are growing today about as quickly as during the mid-2000s, in nominal terms.
    • All other regions’ average wages, while improving, are increasing at a slower pace than last expansion, in nominal terms.
    • In real terms, New England, East North Central, West North Central and Pacific divisions seeing stronger average wage gains today.

Please browse our slides of updated regional comparisons our office tracks on a fairly regular basis. This work helps us place Oregon’s performance in perspective across the nation. One of the biggest benefits when it comes to regional economies and tax revenue is knowing what are national or macro trends seen everywhere and what are state-specific trends or issues. Will provide an update to state level Total Employment Gap work next week.

 

Posted by: Josh Lehner | July 27, 2016

Tourism and Oregon’s Economy

Earlier this month Mark and I had the opportunity to discuss tourism and its impact on the Oregon economy to the Transient Lodging Tax Workgroup, setup following the passage of HB 4146 which raised the statewide lodging tax. Our slides are below. However first I wanted to provide a few summarizing thoughts.

Travel and tourism has been booming in recent years. Nationally the share of consumer spending spent on travel and tourism really has never been higher. Hotel occupancy across the country is at or near record highs. Hotels also have more pricing power today given the strong demand even as new hotel construction picks up.

In terms of employment — borrowing the Federal Reserve Bank of Kansas City’s methodology — the sector in Oregon has just recently regained all of its lost jobs during and after the Great Recession. Consumer spending is back and now too are the jobs across the state. It is no secret that most travel and tourism jobs are low-wage and the industry overall has lower productivity, or value-added in state GDP calculations, than nearly all other sectors in the economy. Even in the economic multiplier world, leisure and hospitality sectors are in the 1.3 or 1.4 range. However there are a few related points here worth mentioning.

First, the flipside of low productivity and low wages coupled with strong industry demand is that it is a large employment sector. 1 out of every 8 jobs in Oregon are within a sector directly tied to travel and tourism. Now, not every single job in these sectors is dependent upon it, but the sectors in a broad sense do rely upon spending from visitors more than some other parts of the economy. This share of jobs varies across the state and the travel and tourism industry has a wide geographic footprint. 28% of all such jobs in Oregon are outside of the Willamette Valley, matching the shares seen in the overall population and public sector employment. Other industries, like the high-wage and fast-growing Professional and Business Services are more heavily concentrated in the urban centers. So the industry is not only important overall but particularly so in some regions like the North Coast where 1 out of every 4 jobs are travel and tourism related and 1 out of every 4 homes are second homes or vacation homes.

Second, these jobs do fill a void and a need in the economy. This is something we (well, me) did not cover in our initial presentation. Representative Davis asked us about it and for good reason. The point being that in the ideal world the economy would produce employment opportunities for everyone along the skills spectrum (and also geographic spectrum too). Of course this is not always how the world works. Job polarization in recent decades has resulted in strong growth in the high- and low-wage occupations. The strong growth in travel and tourism jobs are a result of the strong demand for these types of services in the economy. They can also not easily be outsourced and certainly cannot be offshored, although automation plays a role here too.

Overall the outlook remains bright for the sector. The Baby Boomers today are in their peak travel and tourism years which coincides with their late career and active retirement years. Based on demographics and consumption patterns, growth will likely be slower in the coming decade than in the past, however it is certainly a positive outlook. The Millennials today do not spend as much on travel and tourism but this is due to their age and income levels. As they move into their peak-career and family years, spending will increase, offsetting the future decline of Boomer spending. What does remain an open question are tastes and preferences of the younger generations. They will travel and spend in the future, however will their preferences match their parents’ or will they prefer different locations and activities in addition to lodging type?

Here are our prepared slides for the work group.

 

 

 

Posted by: Josh Lehner | July 21, 2016

Rural Oregon’s Potential Labor Force

In our office’s Rural Oregon report we mention that much of the discussion focuses on data and trends that are backward looking. They indicate how many jobs were lost in the 1980s or how old the typical resident is and the like. While these statistics help describe the current lay of the land, they do not necessarily tell us what tomorrow may bring. To be sure, many of the more forward-looking indicators are also less bright in much of rural Oregon than in urban Oregon, but not all hope is lost. In fact, if anything, some of pessimism about rural Oregon today may be a bit overdone. The reason? Demographics. Yes, that’s right, demographics.

One aspect our office has been researching is potential economic growth and the impact of the aging demographics. Specifically we looked at rural counties and their potential labor force using the same methodology we did for the statewide demographically-adjusted labor force participation rate. What this does is take a more nuanced and I’d argue better look at what is essentially the working age population in rural areas.

What the analysis shows is that while the Baby Boomers’ retirement will weigh on net growth rates across the state, in much of rural Oregon this slowdown has already taken place. It is in the rear-view mirror. Moving forward, the potential labor force will pick up and in some regions it already has.

Why is this? What matters from an economic sense is when an individual ages from their prime-working and peak-earning years into retirement. Unless another individual takes their place, this represents a decline in the economic potential of the economy, everything else equal. And in much of rural Oregon there has been a decline in the potential labor force given demographic and population trends in recent decades.

However, rural Oregon is nearly all the way through this demographic drag. For example, Southeast Oregon is 80% of the way through their demographic drag. The North Coast is three-quarters of the way through theirs. Southwestern Oregon has seen the largest regional decline in its potential labor force, however this has already occurred. Further declines are not expected for the region overall based on our office’s population and demographic outlook, even as individual county performance varies (more on this below).

RurRegPot

Some regions, like the Gorge and Northeast Oregon, experienced a slowdown in their potential labor force but the influx of younger individuals into these regions has been enough to offset the retirements. As such there has not been an overall decline in their potential labor force. This is the pattern seen among urban Oregon as well – a relative slowdown but not outright declines.

However, as mentioned above, individual counties do differ, even neighboring ones. Lets take a quick look at the demographics of Klamath and Lake. Here is the 2015 population distribution by age group. Both counties skew older than the state as a whole, but Lake considerably more than Klamath. In fact the largest age groups in Lake are all between 50 and 69 years old, or the transition period from prime-working and peak-earnings years to retirement. As such, Lake has so far not seen much of a decline in their potential labor force, but are about to in the coming decade or two. While Klamath’s largest age groups also are 50-69 years old, the younger demographic groups are considerably larger in relative size and when combined with the population outlook this results in a smaller potential decline over a shorter time period.PopDist15

The last graph shows the potential labor force declines for each individual rural county in Oregon. Continuing with the Klamath and Lake example, you see that Klamath is about 85% of the way through their demographic drag while Lake is just 9%, due to the different demographic structures and outlooks.

RuralCountyPotential

As stated at the top, much of the focus on rural Oregon is about what has already happened in recent decades. There is no question that many of these trends paint a relatively bleak picture. However, when it comes to gauging the potential labor force, even one of the most commonly cited trends in rural Oregon, that of the older demographics, indicates that not all hope is lost. It is certainly possible that the actual number of jobs and the actual size of the labor force will remain smaller in the future than in the past. However demographic trends and the population forecast suggest that the outlook is brighter than the conventional wisdom suggests. Many challenges remain of course, but demographic pessimism is likely overstated.

Posted by: Josh Lehner | July 19, 2016

Oregon Employment Update, June 2016

This morning the Oregon Employment Department released the initial estimates for June 2016 in terms of jobs and the unemployment rate. Overall the data continue to bring good news, even as the unemployment rate ticked up a bit. The reason being is the state continues to add jobs and the labor force is growing. As shown below, our office’s measures we use to gauge labor market slack continue to improve — certainly over the past year.

First, it is estimated that Oregon added 3,000 jobs last month. Overall the job gains have slowed in recent months relative to late 2015 and early 2016. This is a similar pattern as seen in the U.S. data. However those strong gains of 5,000 or more per month are not sustainable over a long period of time. Such gains are only seen during peaks in the business cycle. Most importantly for Oregon’s economy is the fact that the recent gains are still more than enough to keep pace with population growth.

JobGains0616

Furthermore, Oregon has now reached another milestone in terms of the recovery and expansion. Not only has Oregon added enough jobs to regain all the Great Recession losses, the state now has caught back up with population growth. Even as the economy cratered, people kept moving to Oregon and the state’s Jobs Gap hit nearly 170,000 or 10% back in early 2010. Today this gap is now closed.

JobGap0616

Our office’s outlook has the economy to add jobs at a full-throttle rate until the labor market slack is gone, and for the economy to even run a bit stronger for a little longer than that. So our concern is that if jobs have caught up with population growth, the slowdown in job gains to a more sustainable rate of growth may come earlier than what we have in our outlook. This is something we discuss regularly and is a key factor in the timing of our forecast. So while jobs have caught up with population, the state’s Total Employment Gap still indicates some slack in Oregon, albeit considerably less than in the recent past. Right now the labor market is as tight as it was during the peak of the housing boom. However there remains room for improvement. In fact, the gap increased 0.27 percentage points from May to June. This was due to both the unemployment rate and the share of Oregonians working part-time but want full-time work increasing. These gains were offset somewhat as the labor force participation rate also increased, which is a good thing.

EmpGap0616

All told the Oregon economy continues to improve. It is expected that job growth will slow to a more sustainable rate as economic slack diminishes. However our office’s forecast calls for full throttle rates of growth through the remainder of the biennium. Should the slowdown occur a bit sooner, then we will adjust our outlook accordingly. To date, however, withholdings out of Oregonian paychecks continue to show robust gains. In fact our growth is among the strongest in the nation based on recent conversations with out counterparts in other states.

Posted by: Josh Lehner | July 7, 2016

Office Support Decline Rivals Manufacturing

When it comes to middle-wage job losses, much of the focus is on the blue collar occupations that are generally held by men without college degrees — construction, installation/maintenance/repair, production, and transportation. The story of how globalization, technological change, and other factors have hollowed out these jobs is well known. Not only are their fewer such job opportunities, but their relative wages have eroded to the point where, say, the remaining manufacturing jobs no longer pay much of a premium compared to the economy overall. This is one reason nonparticipation rates are rising among prime working age men without college degrees.

However, there is an important aspect to the decline of middle-wage jobs that is generally not discussed as much: their impact on women. Whenever I give a presentation on our office’s state level job polarization work, I always talk about Mad Men. In the office scenes of the show, there is always one administrative assistant outside of each office. No modern workplace looks like that. Today, one office support specialist serves multiple managers instead with relative ease. Increased productivity can be seen due to computers, software, travel websites and the like. This speaks nothing about other office support occupations like switchboard operators, file clerks and typists which have effectively been eliminated entirely. My back of the envelope calculations show the decline of office support jobs in the Oregon economy overall from 2000 to 2015 has resulted in nearly 50,000 fewer such jobs — for both sexes and all ages — due to this increased productivity and changing workplace practices. That’s equal to one full year of good job growth in the entire state, so a huge number.

While all of the above is true and I regularly discuss these trends on both blue and white collar jobs, I still was not fully prepared for these results. The decline of office and administrative support jobs for women with a high school diploma or less rivals the decline of production jobs for men with the same educational attainment here in Oregon.

MidWageAdminMfg

In the 1970s, about 1 in 5 prime working age Oregon men with a high school diploma or less worked in a production job, essentially the manufacturing jobs that actually do the manufacturing. In the 1980s, about 1 in 5 prime working age Oregon women with a high school diploma or less worked in an office and administrative support job. Today, employment rates in these occupations is roughly half of what it was a generation ago for these demographic groups. The production declines for men are more severe, however the decline of office support jobs for women is certainly of a similar scale.

Middle-wage job losses are not just a blue collar male issue; women have seen large erosion in employment opportunities as well. Where the gender trends differ somewhat, at least in Oregon, is that low-wage work among women without college degrees has increased in recent decades, whereas for men the increases in this type of work are pretty minimal.

Additional Notes:

As a check on the data used here, which has a relatively small sample size, I also looked at Census data from 1980 to 2014. It shows an EPOP decline for males in production jobs of 9.4 percentage points and for women in office support jobs of 7.1 percentage points. So roughly similar to the graph above. What does differ in the Census/ACS data is that the decline for women in office support occupations has all been since 2000. This decline has been particularly large from 2007 to 2014.

One thing that is clear in the ASEC data is that in the past 5-10 years, the share of office support jobs going to women with a college degree has risen considerably. From the late 1980s through 2010, the share of female office support workers with a college degree was 15-20% of all such jobs, among prime working age Oregon women. The 2013-15 average is 34%. This is a massive change. It is also confirmed by anecdotal reports from our friends at Employment, like Christian Kaylor, who talks about how businesses today use a college degree requirement for office support jobs as a mechanism to screen the applicant pool, even though the jobs generally do not require a degree. The data confirm this is having an impact on who gets the jobs.

Finally, in the Census data I also looked at the U.S. overall. Here the decline of men in production jobs with a high school diploma or less declined by a similar margin as in Oregon (9.1 percentage points nationally). However women in office support jobs only fell 4.6 percentage points over this time, considerably smaller than in Oregon. I do not have a good reason for why this differs as the historical figures for 1980, 1990 and 2000 are very similar for Oregon and the U.S. One hypothesis could be the increased number of women with college degrees in office support jobs in Oregon has been larger than national trends. Thus the shift of educational attainment within these jobs is driving the larger Oregon decline. However, that is just a hypothesis at this point.

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